John D. Rockefeller formed one of the largest of the major industry monopolies, the Standard Oil Trust, this week on January 2nd, 1892.

Along with the surge in America’s population, the years 1880-1901 saw the growth of major industries-and the formation of “trusts.” John D. Rockefeller formed one of the largest of these monopolies, the Standard Oil Trust, this week on January 2, 1892.

The historic agreement by Rockefeller and his eight trustees consolidated the producing, refining and marketing assets of nearly the entire oil industry. The promises of economies of scales, however, were dubious at best as cutthroat tactics were deployed to quell any and all competition.

Though dubbed “the most wasteful, the most uneconomical, and after they pass a certain size, the most inefficient way of conducting the industries of this country” by Princeton professor (and later President) Woodrow Wilson… Standard Oil and its brethren were initially sanctioned government entities, conveniently incorporated in friendly states. Reaping the rewards, the trusts enjoyed a monetary free ride for many years via fixed prices. The wrath of workers and muckraking journalists like Ida Tarbell and Sinclair Lewis, however, eventually made an impact on elected officials- spurring on a fed-up President Theodore Roosevelt and legislators to effectively challenge the “natural” monopoly chokeholds. In 1911, Standard Oil was ordered to dissolve- followed by the “Baby Bells” bust-up-in 1984!

This Week in Wall Street History

12/31/07